Masking up again in Las Vegas

Just when Las Vegas tourism edged closer to a recovery, the alarm has sounded that the rebound from the Covid-19 pandemic is in jeopardy or will at least be slowed.

On Thursday, Nevada reported how June marked the fourth consecutive month of gaming revenues in excess of $1 billion -- the first time that’s happened since 2008, prior to the Great Recession. The excitement has been building with the June opening of Resorts World Las Vegas - the first Strip casino to open since 2010 - and removal of a mask mandate and capacity restrictions in May.

June visitation to Las Vegas recorded its best month at nearly three million people (still 18% below June 2019’s 3.6 million and without the return of international travel) since casinos reopened from the pandemic in June 2020.

But on Friday Nevada imposed an indoor mask mandate that includes casinos in Clark County where Las Vegas is located. It comes as COVID cases are spiking in the state with Nevada reporting it had some of its highest one-day increases in cases in more than six months and some of its highest death levels since January. Hospitals are now pushed to their limits in a state with low vaccination rates compared to the U.S. as a whole.

There are reports from gaming industry observers that requiring visitors to wear masks indoors -- mirroring a recommendation from the federal Center for Disease Control -- has already prompted tourists to cancel or delay their trips without the freedom to go maskless.

In addition, reports from the CDC about the small percentage of breakthrough cases for the vaccinated and that the COVID-19 Delta variant that’s taken hold is more transmissible than the flu, smallpox and Ebola and more contagious than chickenpox may further encourage people planning on going to Las Vegas to stay home.

The rising Covid caseloads in Nevada have prompted travel advisories in the past two weeks from health officials in Los Angeles, Hawaii and Chicago about traveling to Las Vegas - public messaging that can suppress travel from those feeder markets.

“When those statements are made, they have further reaching impact because the world is listening,” said casino industry consultant Josh Swissman, founder of The Strategy Organization.

There have been some reports about a rash of hotel cancellations, but Swissman said that may only be a short-term phenomenon. Some health experts have suggested masks may only be needed for a month or two before the nation’s infection rate drops.

All of that uncertainty weighs on the return of the convention business - the key piece of any recovery for midweek hotel stays - that was just starting to inch back this summer with events already bringing thousands of visitors in June and July. Las Vegas was expected to welcome tens of thousands of visitors this fall and into the winter, culminating with the Consumer Electronics Show in January where more than 180,000 people attended in 2020 prior to the pandemic.

“There’s been so much of a push in messaging and marketing that Vegas is back and Vegas is open and 'Come enjoy yourself and be carefree for the first time in a year-and-a-half.' The numbers showed that’s exactly what happened, and you had scenes of pool parties and clubs filled as if it was back to 2019,” said Corey Padveen, a partner with t2 Marketing International.

“The downside now is people who were looking for that experience may have to wait and pull back on the excitement of going back to Vegas. It’s just like The Godfather. Just when you think you’re out, you’re pulled back in.”

The world will get a better perspective and outlook of Las Vegas from gaming executives this week when Caesars Entertainment, MGM Resorts International and Wynn Resort answer questions from Wall Street analysts during second quarter earnings calls.

In calls last week, executives with Red Rock Resorts and Boyd Gaming remained bullish, even with the mask mandate, but those two gaming companies rely on local gamblers rather than convention attendees and tourists who fly in and seek out non-gaming amenities such as entertainment.

MGM Resorts CEO Bill Hornbuckle gave a preview of his concerns last week when he sent a letter to company employees urging them to get vaccinated. He said the region’s low vaccination rate is putting Las Vegas back on the path to overrun hospitals, unnecessary deaths, fewer tourists, and possible furloughs and layoffs.

“After the pain endured by so many these past 16 months - and the tremendous progress made in 2021 - I can think of no more damaging scenario for us as a community,” Hornbuckle said. “This is another disheartening step backward, when we should be focusing on continuing our recovery. In addition to the heart-wrenching thought of more illness and death, I fear that progressively more restrictive measures, including a return to social distancing and capacity restrictions, could be around the corner if we continue on this path. This would be a significant blow to our community, industry and economy.”

Barry Jonas, an analyst with Truist Securities, said Las Vegas casinos that serve locals thrived pre-vaccine, and the assumption is they would do equally as well or better under post-vaccine COVID.

“The earnings calls we have seen to date suggest Vegas local casinos where gambling is the bulk of revenues don’t seem quite as concerned,” Jonas said. “Red Rock [executives] said once masks were removed [in May] they didn’t see any pickup in business and aren’t worried bringing masks back will have a detrimental effect.”

The big question mark, Jonas, said is with Strip-based properties that rely on food and beverage, entertainment, and nightclubs, group conferences involving fly-in travel during midweek - elements with a less focus on gambling than local-based casinos.

“We expect to hear some concerns [from Strip executives] this week but at what scale,” Jonas said. “Clearly, the weekends have been strong in Las Vegas because people want to get back to normalcy, but the question of what’s the impact is the great unknown. Non-gaming is historically two thirds of the mix for destination-oriented Strip travel, and requiring masks is detrimental to getting back to that split in revenues.’

While “mask on” and “mask off” may be part of the near-term future, Jonas said that given the economic ramifications, no one is expecting capacity to be scaled back to where it was earlier this year at 25%. It didn’t get back to 100% until June 1. Las Vegas’ nearly 150,000 hotel rooms were 76% occupied in June -- it’s best since the reopening but still below the 92% in June 2019.

“There is a realism setting in that we may have to live with the ebbs and flows of COVID and ramifications for quite some time,” Jonas said.

Beyond tourism, what’s happening in Las Vegas sends a message to companies across the country thinking about sending employees to trade shows and conferences to be more conservative, Jonas said.

“We’re starting to hear from some companies taking a hard look about whether their recent opening up to in-person meetings makes sense and whether they should scale that back to virtual, at least temporarily to see how this shakes out,” Jonas said.

Swissman said he only expects there would be cancellations of smaller company-based meetings in the short term over the next month or two but not “well into the future” as vaccination rates rise and infections decline.

If casinos had to cut capacities below 100%, that would be a blow to conventions and could prompt cancelations, Padveen said. That would likely only follow some national state of emergency because Nevada has “no interest in cutting the lifeblood of its economy unless being forced to do so,” he said. “But you never want to count a last resort out because we’ve lived through it for the last 18 months.”

As the pandemic continues to linger on in Las Vegas, there will be discussions on whether there needs to be a “major overhaul of processes in crowded places moving forward on a permanent or semi-permanent basis.” Padveen said.

Las Vegas is in a situation comparable to people driving on a vacation. When people drive home, they know where they are by the destinations they pass again, Padveen said.

“We don’t have that at this point,” Padveen said. “We’re driving straight ahead and hope we get to wherever we’re going at some point.”

Brendan Bussmann, a consultant with Global Market Advisors, said there’s still a lot of uncertainty of when the country will get out of the pandemic and now concern about the impact from the latest mask mandate and growing COVID infections on Las Vegas.

“I think anyone who doesn’t assume we will see a downturn off of this is probably drinking a little too much of the Kool-Aid,” Bussman said. “Operators are very concerned about the overall recovery, and this past week’s events haven’t helped bring consumer confidence up that Vegas is fully open like we proclaimed back in May and June.”

Bussmann said he remains confident the Las Vegas recovery will continue but doesn’t know when it will pick back up where it left off.

“The Strip still needs time to recover, and I still hold true that the recovery happens in 2023, but that could get delayed until 2024, depending on how long this cycle lasts.”

Buck Wargo is a Las Vegas-based business and gaming journalist. He’s a former reporter for the Los Angeles Times. He has a degree in Middle Eastern Studies from the University of Texas and worked as a foreign correspondent in the Middle East.